American Honda Finance found guilty of illegal discrimination

The Consumer Financial Protection Bureau and United States Department of Justice have found American Honda Finance Corp. (AHFC) responsible for illegal discrimination in pricing auto loans, the company said in filing with the US Securities and Exchange Commission.

The company also disclosed in the filing that it may face sanctions until it settles with the federal agencies. American Honda Finance Corp. is similar to a move by Toyota Motor Credit Corp. on Nov. 28. Both captive finance companies said in 2013 that the federal agencies had asked information regarding auto loans.

AHFC said that it a notice that the Agencies have authorized enforcement actions against the captive finance unit, alleging discrimination in auto loan pricing to certain borrowers by dealers and alleging the loan pricing disparities were caused by the company’s business practices related to dealers.

AFHC said the agencies may not pursue the case if it works with them to seek a “voluntary resolution.” According to AHFC, the federal agencies want monetary relief for customers as well as changes in its pricing policies.

In 2013, the Consumer Financial Protection Bureau disclosed that auto lenders were to be blamed for higher rates for dealer reserve for legally protected classes of borrowers like minorities and women. The bureau said auto lenders made those higher rates possible by allowing dealerships to impose customers with similar credit histories different rates.